Top Trump advisor furious about true cost of tariffs being revealed, vows to punish New York Fed for ‘worst paper’ ever in history

A New York Fed blog by Amiti, Flanagan, Heise and Weinstein finds over 90% of the economic burden from 2025 U.S. tariffs fell on American households and firms after the average tariff rose from 2.6% to 13%, and import prices were about 11% higher versus non‑tariffed goods by November. White House NEC Director Kevin Hassett sharply attacked the study as biased and called for discipline of the authors, underscoring a political dispute over tariff incidence and macroeconomic effects. For investors, the data imply tariffs are exerting material cost pressure on consumers and firms—adding inflation and demand risk—while political friction with the Fed increases policy uncertainty.

Analysis

Market structure: The NY Fed finding (tariffs jumped from 2.6% to 13% and import prices ≈+11% vs non-tariff goods) implies direct winners are domestic input producers (steel/metals: NUE, X) and some local manufacturers able to source domestically; losers are import-dependent retailers and brand owners (TGT, PVH, HBI) who face margin compression or must raise prices and risk volume loss. Pricing power will bifurcate: large low-cost retailers (WMT) can absorb or pass costs; specialty brands without scale will cede share.

Risk assessment: Near-term (days–weeks) expect idiosyncratic equity volatility around earnings and tariff announcements; short-term (1–6 months) margins and inventory re-pricing will show in retail/CPG EPS guidance; long-term (6–24 months) look for supply‑chain reshoring benefit to domestic capex and commodity producers. Tail risks: tariff escalation or credible political interference in the Fed (DOJ/Fed tensions) could spike real yields and equity volatility; hidden dependencies include USD moves and freight/container rate dynamics.

Trade implications: Favor selective longs in domestic cyclicals (steel, industrials) and inflation-protected assets; short import-exposed retail/consumer discretionary and use option structures to size convexity. Cross-asset: expect upward pressure on breakevens → TIPs outperformance; higher realized/IV in retail/industrial options for 1–3 month expiries.

Contrarian angles: Consensus underestimates tariff stickiness — political blowback may prevent quick rollbacks, so don’t rely on mean reversion in import costs within one quarter. Historical parallel: early-2000s steel protectionism benefited producers for years even as consumer sectors recovered later; unintended consequence: retailers accelerating nearshoring will boost capex for logistics/rail (UNP) on a 12–24 month view. Monitor import-weighted CPI and company-level import exposure for trigger-based scaling.

Key Decisions for Investors

• Establish a 2–3% long position in Nucor (NUE) with a 6–12 month horizon; target 20–35% upside if steel pricing and domestic demand firm, stop-loss -12%.
• Initiate a 1–2% short or buy 0.5–1% notional 3‑month put spread on Target (TGT) with strikes ~5–8% below spot to capture near-term margin risk; roll/close on earnings/Gross Margin guide improvement.
• Allocate 1.5–2% to TIP (iShares TIPS ETF) for 6–12 months to hedge persistent tariff-driven CPI upside; increase to 4% if import-weighted CPI delta >8% for two consecutive months.
• Open a 0.5% notional 3‑month VIX call spread as a tail hedge against political/monetary escalation (buy lower strike, sell higher strike to cap cost); increase if DOJ/Fed headlines intensify or yields gap >50bps intra-day.
• Execute a pair trade: long NUE (2%) / short TGT (1%) to express margin divergence over 3–9 months; scale positions only if company-level import exposure confirmed >30% of COGS on upcoming quarterly filings.